In what will likely be seen as model for city pension reform, the Atlanta City Council has approved a major overhaul of the city's pension system, making it the first major U.S. city to tackle the growing pension crisis.

City officials voted unanimously to approve the sweeping changes, which will help pay off the city's $1.5 billion unfunded pension liability and save about $25 million annually.

According to the Atlanta Journal Constitution, the new plan requires all police officers, firefighters and city employees to contribute an additional 5% of their wages to the city pension system and reduces the cost-of-living adjustment for future employees to 1%.

Most future city employees will receive a much smaller pension and be put in a 401(k) style plan.

The reform staves off a potential fiscal crisis and allows the city to continue providing essential services. Atlanta's unfunded pension obligation was 20% of the city's annual budget and and the liability was projected to grow to $4.5 billion in 10 years if left unchecked.